UK tax on US shares

First Time Investing šŸ£
#1

I have investments in several US companies from my UK Freetrade account. I went through the W8-BEN process via the app when buying my first US stock.

I know the W8-BEN sorts out the US tax side of things, but not sure about UK tax on such shares? From reading I can see that Stamp Duty Reserve Tax (SDRT) is paid automatically on UK shares, but do I need to pay anything to HMRC like SDRT for US shares?

I just want to get my tax affairs in order so I donā€™t receive any penalties further down the line. Additionally, do I need to ā€œrenewā€ or fill out again the W8-BEN in the US at any point?

Thanks.

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#2

Thereā€™s no stamp duty on US assets. The W8-BEN reduces the amount of US withholding tax from 30% to 15%. You only need to complete it once, though if your US citizenship status changes in the future you will need to inform every broker through which you have completed the form.

You still need to pay UK dividend and capital gains taxes on US stocks if you go over the allowances, which are currently Ā£2,000 and Ā£12,300 respectively. You can avoid these taxes by holding the shares in an ISA.
You usually donā€™t need to report your capital gains and dividends if they are below the allowances but there is an exception if the total amount of share sales is more than four times the allowance even if your total gains are within the allowance.
@Conladx gave a good example of how this works here:

The government guidelines on reporting and paying capital gains and dividend taxes are here:

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#4

W8-BEN expires after three years, so you do need to renew it

#5

I stand corrected. Thanks, I didnā€™t know that.

#6

Be aware that on some high dividend yield US stocks there is no reduction in US tax and the tax is US withholding tax can be up to 33%. I found out to my cost on Enterprise Product Partners (EPD) so what appears to be a high yield intially does not look so attractive when you tale one third off ! There are others too so it pays to check out each position before investing.

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#7

Interesting. Is there any particular characteristic of the equity that causes that?

#8

Iā€™m not sure. There are others where the Tax charge is 25% and that is what you pay as a UK investor . I actually checked the tax on EPD and it is actually 37% !
It is obviously down to the US Tax authorities on an individual basis.

Garry

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#9

I think itā€™s linked to its form. LLCs have weird taxation going on as far as I know, which is what most pipeline companies chose, e.g. Enterprise Products or Kinder Morgan.

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#11

Is your capslock broken?

You definitely need to read up a little about capital gains tax (and grammar etc.).
The allowance is 12.300Ā£ per tax year. So if you make a less than that Ā£ profit, you donā€™t need to pay any tax.
Tax is never taken, you need to declare it yourself anyway. Freetrade just takes a conversion fee from dollar to pound and vice versa.

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#12

lol its not broken , just wanted to make my point and make sure it is answered soon as!

Okay so despite me working my normal job and paying tax as normal. I dont take this into account aswell?

#13

thnks for your response , so to answer my question based on the example I gaveā€¦

I would not need to pay any tax on the stocks?

up to 12,300?

#14

Your 12.300 capital gains tax allowance is separate from your income tax allowance, so you wouldnā€™t pay any tax unless you either made more than that in profit, or you had other capitals gains elsewhere that used up your allowance

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#15

Cheers Dave!

I HOPE AMC REACHES THE MOON AND PEAKS JUST UNDER 12,300 after profits haha!

#16

Why, surely it would be better to go up further even if it means you have to pay a bit of tax?

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#17

Now your question is answered, can you turn off the caps lock?

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#18

depends on how much tax I would have to actually pay?

any examples say its Ā£15,000 , how much roughly would go to tax?

appreciate the help man

#19

Behave

#20

You still wouldnā€™t pay any tax on the first 12.300. so it would be a percentage of the next 2700

the rate depends on what tax band you are in

#21

Thanks Dave as you can tell I am new to all this and only just started trading last week lol.

Might take some time to get used to all these terms.

Thanks again

#22

I never understand this response and I have heard it before but surely 60% extra profit is better than none above a certain number?